Cybersecurity and recalls will mean over-the-air updates for 203m cars by 2022

Imagine having to go to a retail store or use a thumb drive just to upgrade the software on your smartphone or tablet. Soon, consumers may consider it just as outrageous to do the same when updating the software in their vehicles.

Like a smartphone, cars are increasingly defined by computer hardware and software. They're quickly becoming a consumer's largest electronic mobile device -- a fact not lost on manufacturers who are racing to make over-the-air software updates standard.

By 2022, there will be 203 million vehicles on the road that can receive software over-the-air (SOTA) upgrades; among those vehicles, at least 22 million will also be able to get firmware upgrades, according to a new report by ABI Research.

There will be fewer vehicles capable of wireless firmware updates because the code is more critical to the basic functionality of a computer than application software, and designers therefore make it more difficult to replace or upgrade. Changing application software, however, is a relatively straightforward and similar task, regardless of the platform.

The main reasons automakers are moving quickly to enable OTA upgrades: recall costs, autonomous driving and security risks based on software complexities, according to Susan Beardslee, a senior analyst at ABI Research.

"It is a welcome transformation, as OTA is the only way to accomplish secure management of all of a connected car's software in a seamless, comprehensive, and fully integrated manner," Beardslee said in a statement.

All-electric vehicle (EV) maker Tesla Motors has been an early leader in OTA updates, as the company began offering them early last year in its Model S sedans. One of the most recent Tesla OTA updates enabled semi-autonomous driving features.

Beyond Tesla, car OEMs will primarily focus the next three to five years on SOTA updates rather than the still-nascent FOTA upgrades.

Increasingly, carmakers are including Wi-Fi routers with greater broadband capabilities in vehicles for OTA software updates.

"As a manufacturer, you'll have to have it to even be considered by the consumer," Thilo Koslowski, vice president and automotive practice leader for market research firm Gartner, said in an earlier interview.

The OTA market is expected to reach $45 billion by 2022, according to IHS Automotive. The vast majority of it will be related to the money-saving capabilities of OTA, where vehicles won't have to be taken to dealerships for upgrades or software recalls, he said.

Recalls, in particular, are driving the adoption of OTA updates. In the past two years, the vehicle recall rate increased to about 46%, with four major carmakers setting aside a combined $20 billion in 2015 in warranty reserves, according to ABI Research.

While not all recalls can be fixed via an OTA update, close to one-third of those from last year could have been addressed over the air, saving carmakers at least $6 billion, according to ABI.

FCA

The infotainment system in a Jeep Cherokee. Chrysler, Dodge, Jeep, and Ram was part of a recall last year to address a hacking incident with a Jeep. The recall affected 1.4 million vehicles.

For example, a Chrysler, Dodge, Jeep and Ram recall last year dealt with a hacking incident involving a Jeep; that recall affected 1.4 million vehicles. Fiat Chrysler Automobiles (FCA), the world's seventh largest automaker, sent USB drives to affected customers to fix the security hole.

"This method, in place of an OTA update, increased security risk, the plausibility of owner identification, and the inability to ensure that the patch was done and done correctly," ABI Research said. "Ford and Toyota also faced similar situations through their own recalls."

As the level of vehicle autonomy grows, cybersecurity will become increasingly critical. ABI Research anticipates the automotive industry will begin to see more mergers and acquisitions over the next two years as carmakers emphasize the value of software management solutions.

For example, the OTA market is spurring a flurry of acquisitions like the one between, leading IVI system maker Harmon, who last year acquired OTA software supplier Redbend.

Another big acquisition targets is Argus Cybersecurity, which just received Series B funding from Magna International and recently partnered with security vendor CheckPoint Software Technologies, according to Beardslee.

Another leading software management vendor in the automotive industry, Movimento, refreshes more than 3 million vehicles per year and can detect and delete cyberattacks within 10 milliseconds, according to Beardslee.

"Movimento, in particular, is a huge acquisition opportunity," Beardslee said.

The move toward OTA updates brings new challenges, in particular the threat to car dealerships and the danger of customers opting out of software upgrades.

"The car dealers have everything to lose," Beardslee said. "When the automotive industry becomes fully OTA, car dealers lose not only the revenue enhancement that they acquire in making updates and repairs, but they lose the associated foot traffic.

"Customer opt outs, on the other hand, were a challenge long before the arrival of OTA and one that [carmakers] will likely find a way to address as they move toward a recurring revenue generation model in the early 2020s," she added.

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